'Bogus college made £16m by signing up 80,000 students... but only 18 left with a qualification'

Scam: Three men are accused of running a bogus long-distance learning college which awarded just 18 students with valid qualifications (file picture)

More then 80,000 students across the UK were conned into signing up to a bogus college in a scam that made a trio of men £16 million, a court has heard.

Thousands of students paid millions to the National Distance Learning College (NDLC) for long-distance courses in computer and business subjects.

Government grants were also put into the College's accounts - but used to pay personal debts including one of the founders' gamblings debts, it is claimed.

Just 18 students gained a recognised qualification from the long-distance learning school before it collapsed in 2001, Teeside Crown Court heard.

Michael Smallman, 44, from Northallerton, Peter Kenyon, 42, from Great Ayton, North Yorkshire, and John Hornsby, 59, from Darlington, are accused of fraudulent trading.

Mr Smallman's wife, Angela, 41, also of Northallerton, is also charged with related offences including money-laundering. Their trial is set to last at least four weeks.

Prosecutors claim Mr Smallman, who set up the college in Middlesbrough, once described it as the largest of its type in Europe.

Andrew Wheeler, prosecuting, said: 'During the three year period from 1999 to 2001, something over £15 million flooded into the accounts of the college, making Mr Smallman a very rich man indeed.'

The three men had 'dishonestly pretended' to students their courses were accredited by major educational bodies including BTEC and City and Guilds, he claimed.

He told the court students were led to believe they would end up with qualifications approved by the recognised bodies.

In fact, the prosecution say money paid to the college - as well as government grants for the students' training - were transferred to pay off Mr Smallman's personal expenses, including his gambling, Mr Wheeler said.

He claimed Mr Smallman invented educational bodies and sent out worthless forged certificates.

The founder also allegedly used the word 'national' in the company's title to 'give an impression of a long-established and recognised institution'.

Mr Kenyon, a former bank manager, and Mr Hornsby, a chartered accountant, were brought in as managing director and financial director respectively in 2000 because the college had grown so much.

It was alleged the trio became the 'inner circle' of the NDLC during its most profitable period.

Mr Wheeler said: 'The Crown suggests that they deliberately and cynically caused courses to be sold to the public on the basis that such qualifications would be achieved at the end of the courses if the person passed.

'This conduct went well beyond the bounds of what decent people engaged in business would regard as honest.'

The court heard that from April 2001, the press began investigating the company and printed damning articles, spurred on by growing unrest from annoyed students.

But Mr Smallman continued to transfer large sums of money until the company went bust, leaving the students 'high and dry', the jury heard.

'According to the statements of those who worked for him, he was a bully who trampled on all who were in his way'.

The men went on to set up other companies within the group, using income from the NDLC, including Assert Training Ltd and Tutorial Services Ltd.

Mr Wheeler said: 'All three knew precisely the risk that was being made with the removal of these funds in the circumstances.'

After the company's collapse, the prosecution said students unwittingly continued to pay a standing order of £15 to another Smallman company called Association of Professional Development (APD) - totalling around £180,000 - in return for pre and post-course support and a quarterly magazine, which they did not receive.

The court was told Mr and Mrs Smallman, who worked for the company as an internal course verifier in its early days, lived primarily off the funds of the NDLC.

They were both arrested in 2004, but Mrs Smallman claimed she was unaware of any malpractice and had done as her husband had asked.

But Mr Wheeler said her bank account was still used for the dispersal of the fraudulent funds after police told her exactly what her husband was accused of.

She faces three charges of acquiring criminal property totalling £6,070 on dates between September 2003 and October 2004, and one charge of transferring criminal property worth £15,144.41 in July 2005, which she knew or suspected to be the benefit of criminal conduct.

She is also charged with entering into an arrangement to facilitate the acquisition, retention, use or control of criminal property between October 2004 and November 2006.

The three men are each charged with making around £16 million by carrying on a business with the intention of dishonestly defrauding students between January 1999 and February 2002.

They are also accused of running a business between September 2001 and February 2002 with the intention of defrauding the Government's Department for Education and Skills, dishonestly making claims under a grants scheme to acquire £85,000.

Mr Smallman faces a third count of fraudulent trading, relating to his running of the company APD between July 2000 and January 2006, with intent to defraud students.

The trial continues.

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'Bogus college made £16m and signed up 80,000 students... but only 18 left with a qualification'